Nantucket Island Resorts files suit against O’Connors, Atlantic Cafe

Thursday

Feb 12, 2009 at 2:00 AM

By Jason Graziadei I&M Senior Writer

The Atlantic Cafe and its owners, John and Kate O’Connor, have been sued by the restaurant’s landlord Nantucket Island Resorts for allegedly failing to pay more than $141,000 in lease payments on the South Water Street property since July 2008.

The Atlantic Cafe has been closed since mid-December, and while the phone message at the restaurant states it will reopen this April, it’s unclear whether the O’Connors and NIR will be able to reach a resolution on the outstanding lease payments.

The O’Connors have owned the popular downtown restaurant for the past 19 years, but have struggled to keep it going as the economic recession deepened and the changing demographics of the island have slowed business substantially in recent years.

One of the few traditional year-round restaurants that for years served the island at the height of the season and during the dearth of winter, the Atlantic Cafe suffered a significant blow when the adjacent Dreamland Theater shut down in 2006, and has seen a continuing flow of new year-round restaurant options sprouting up in the mid-island area, exacerbating the difficulties of operating a downtown eatery.

In October 2008, the O’Connors said they needed to find an investor who could inject a major infusion of capital to make the improvements the landlord desired in order to compete in the current market, but it appears there were no takers.

Although the lawsuit was filed on Jan. 26, as of presstime John O’Connor had not been served with the paperwork, and declined to comment about the matter. Nantucket Island Resorts representatives did not return several calls seeking comment about the lawsuit. NIR is a subsidiary of New England Development, whose chairman and CEO is summer resident Steven Karp.

The O’Connors’ lease on the restaurant building ended Dec. 31, 2008, and “to date, the Atlantic Cafe has failed and/or refused to vacate the premises,” NIR alleges in the lawsuit.

Attorneys for NIR are also seeking to place attachments in the amount of $150,000 on the O’Connors’ real estate and personal property. A hearing on the motion for those attachments is scheduled for Feb. 24 in Barnstable Superior Court.

Documents filed as exhibits with the lawsuit reveal that the O’Connors agreed to a one-year lease extension with NIR at the end of 2007 following the expiration of a seven-year lease they had signed with the previous property owner, Winthrop, in 2000.

The terms of the lease the O’Connors signed with Winthrop mandated lease payments equal to 10 percent of gross sales at the Atlantic Cafe, or a minimum of $1.84 million over the seven years.

The lease extension, which was signed by the O’Connors and Karp himself in December 2007, required the O’Connors to pay $250,000 in total payments for 2008, which represented a $50,000 reduction from what they had paid the previous year.

In a recent interview, John O’Connor pointed to another factor that is hurting the character and sense of community in the core district: the loss of locally owned and operated businesses.

“We used to have shop owners bring their employees in for lunch. That hasn’t happened in a long time,” said O’Connor. “Those shop owners no longer live here.”

“We’ve lost a whole economic strata on the island – the merchant class. A whole section of our community is now gone. We have a dwindling merchant class.”

While business has dropped, the O’Connors said this fall they felt that certain changes to the building would help them compete better in the marketplace.

A rear patio, facing Easy Street, would provide al fresco dining with a waterfront view, a big draw in the summer, said John O’Connor. Reorienting the bar so it is not the focal point of the front of the restaurant, would also help lighten and brighten up the restaurant and increase the dining appeal, he added. Both changes would involve redesigning much of the interior of the restaurant.

It’s been done before with the space, back when it was called Cy’s Green Coffee Pot. Thirty years ago the Atlantic Café became Nantucket’s first fern bar, serving “counter-culture food:” nachos, hummus and tabouleh, as well as burgers, chicken fingers and zucchini sticks. Vermont restaurateur and entrepreneur Billy Hunter successfully transformed Cy’s, a 1950s bar and local hangout with simple food, into an upscale bar and family restaurant with a nautical feel. He renamed it the Atlantic Cafe. John O’Connor worked for Hunter (today an island attorney) and his partners Bill Fish and Tom Kennelly (today the head of real estate at Congdon and Coleman) before taking over the restaurant 19 years ago.

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